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Analysis: This is one of our favourite precious metals fund available to investors today. It is managed by the team of Chris Beer and Brahm Spilfogel. It invests in companies that are involved in the exploration, mining and production of gold, silver and platinum, and may also invest in gold bullion and gold certificates up to a maximum of 20%.
The team looks for companies that are run by experienced management, have strong balance sheets, and proven reserves or excellent geological potential. They look for companies involved in both exploration and production. Typically, the fund will hold approximately a third of the assets in a select group of high quality, liquid, large cap names which are selected using the resources of the RBC Global Asset Management Team. For the balance, the team looks for small and mid cap names, conducting intensive research, looking to uncover new and unknown investment candidates.
The end product is a portfolio that will typically hold more than 200 individual names. Despite the breadth of names, there is significant concentration with the top 10 making up roughly half of the fund. The managers are active in their approach with portfolio turnover levels averaging 90% per year.
Performance over the long term has been phenomenal. For the 10 years ending February 29, the fund has returned an annualized compound return of 24.3% to investors. Not surprisingly, most of that gain has occurred since mid 2008, when gold began its rapid ascent. Shorter term numbers are less impressive, with a one year loss of 17.2%.
Volatility is very high. On a historic basis, the volatility is more than two times the volatility of the broader market. We do not expect that to change. But within the precious metals category, this has been one of the least volatile funds and has consistently delivered above average risk adjusted returns.
Despite the strong returns, this is a category that most investors will want to take a pass on. The volatility and probability of a loss is significant and far too high for most medium risk investors. However, for high risk investors looking for exposure to the precious metals sector, this is definitely a fund worthy of consideration.